Toyota profits, sales and stock price are all on the rise
By Jamie Butters, Knight Ridder Newspapers
12/26/2003
DETROIT — Toyota Motor Corp. posted record half-year sales and profits, boosted its dividend and raised its sales forecast recently, all of which drove up its stock and capped a nearly 10 percent gain over three days.
From April to September, the Toyota City, Japan, automaker earned $4.8 billion, a 23 percent increase, on sales of $75 billion, despite a slip in revenues and profits from the vital North American market.
North American operating profits were down 10 percent to $1.5 billion, which was attributed to rearranging the manufacturing lineup at its plants in Ontario, Canada; Kentucky and Indiana.
Toyota spent an undisclosed amount of money on the moves, which are intended to make the plants more efficient. Assembly of the now-longer Sienna minivan moved from Kentucky to the light-truck plant in Indiana; the Camry Solara coupe moved from Canada to the Camry plant in Kentucky; and the Lexus RX 330 was launched in Canada.
The RX 330 — the second generation of the RX 300 luxury SUV — is the first Lexus model to be built outside Japan.
"We are confident that we are already back to the normal business," said Toshiaki (Tag) Taguchi, president and chief executive officer of Toyota Motor North America, the New York-based holding company for Toyota’s U.S.
sales and manufacturing units.
Higher incentives also hurt Toyota’s North American results, rising 73 percent to $1,179 per vehicle, according to a note issued by analyst Michael Bruynesteyn of Prudential Securities. That is still well below the industry average.
But Taguchi said that Toyota is not motivated by competitive market-share goals, such as topping Ford as the top-selling car brand in the United States — a first for a foreign brand.
Taguchi said the company aims to deliver the best quality and treat its business partners fairly.
"So long as we will keep doing it, I hope we will be able to keep increasing gradually the volume," he said.
Toyota had several pieces of good news for investors last week. The automaker:
‰Raised the outlook for worldwide vehicle sales by 160,000 to 6.57 million in the fiscal year.
‰Boosted the dividend 25 percent.
‰Said it plans to repurchase shares, beyond the $675 million it has spent so far this fiscal year.
Japanese automakers typically operate on an April to March fiscal year, and, like European automakers, place more emphasis on half-year results than on individual three-month quarters. Toyota just posted its fifth-straight six-month record.
In the most recent half-year, Toyota earned more than 1½ times General Motors Corp.’s expected profits of almost $3 billion for the whole year and almost three times Ford Motor Co.’s expected profits of $1.8 billion.
Toyota is the world’s third-largest automaker as measured by the number of vehicles sold, trailing only GM and Ford.
But in terms of market capitalization — the value of all the shares — Toyota is easily the biggest, worth about twice as much as Nissan Motor Co.
and more than four times the value of either Ford or GM.
Another factor helping Toyota’s shares was a slight weakening of the Japanese yen, after it had strengthened against the dollar.
A weak dollar is generally seen as a threat to Toyota and other Japanese automakers, because it means that the company records fewer yen for each dollar of profit earned in the United States.
But it is unlikely to slow Japanese automakers’ U.S. market-share gains, according to a recent report by John Casesa of Merrill Lynch. Ever-increasing North American production reduces the currency impact, and the automakers "have historically traded margins for share in such situations," he said.
And Bruynesteyn said that currency fluctuations actually helped Toyota’s most recent profits by about $250 million because of the strong euro.
But he added that it will be tough for Toyota’s shares to gain much more because Toyota has relatively few new vehicles coming over the next two years — and the yen is not expected to weaken.
The weaker dollar actually serves to help Toyota when it invests money in North America, on top of the $14 billion already spent on offices, parts plants and assembly plants.
Toyota is building a truck-bed and pickup assembly plant in Baja California, Mexico, which is to begin production next year.
Last month it broke ground on a pickup plant in San Antonio, which is set to begin producing Tundra full-size pickups in 2006, and last week Toyota and subsidiary Bodine Aluminum Inc. broke ground in Jackson, Tenn., on an engine-block casting plant.
And Toyota announced a $15.6 million expansion to its North American manufacturing headquarters at Erlanger, Ky., in suburban Cincinnati.
Construction of the 98,400-square-foot expansion of the company’s quality and production engineering laboratory is to begin this fall and be completed next summer.
